Why Startups Die
pixelmonkey.org
pixelmonkey.org
- The market wasn't there, the problem was too hard to solve, etc.
- You simply weren't good enough to solve the problem. You didn't have the right combination of skills, experience, or connections to make it happen.
These are more interesting to me as you can attempt to succeed where other people have failed. I've always had an idea in the back of my mind about getting a list of startups that failed before 2001, figuring out which had good ideas, then retrying them again.
Disclosure, I wrote this: http://www.amazon.com/gp/aw/d/1416577939
This sounds like a truism to me. Like "the brain stopped working", it's more a definition of death than an explanation of what caused it.
> But I think the underlying cause is usually that they’ve become demoralized.
And this, I suspect, is confusing correlation for causation. The team getting demoralized is a symptom of the company being in a poor, possibly life-threatening, state of health. Like many symptoms of real disease (e.g., diarrhea) it's something that will worsen the situation and needs to be treated. But it's not necessarily the underlying cause. If the real source of illness is something that won't resolve on its own then focusing too much on the symptoms is at best a form of palliative care. At worst, it exacerbates the situation by lulling you into believing that you're addressing the problem when you're actually allowing it to continue unchecked.
Running out of funding. This is a tough one to deal with, because you think you can make up funding with more work. My solution is to offer a very stage product right from the start in order to get some cashflow going in. So far it has worked.
Building something people don't want. I once spent two years developing an idea to only realize people did not want to pay for it. Two years spend buying equipment, developing marketing, etc. But I did not test the market. I know.
Lack of sales skills. This one is really tough. As an introvert, is was really hard getting how sales work. I read book after book trying to find the magic formula. Turns out that sales skills are more about social skills than anything. So my lack of sales skills were really a lack of social skills. One good startup died due to that. But I did realize the problem, and have been working on improving my sales/social skills. So far so good...
Wrong market. Spent five years trying to sell to a market that would not buy from me. Why? A combination of lack of social skills and pricing kept me from achieving any success.
Being the lone founder. My biggest successes have been when I've worked with someone else. Having someone to split the workload makes a huge difference.
Buying too much inventory ahead of time/demand. I still have some left.
Not getting deals on writing. A good startup I was building died because I did not get a deal in writing. I went and bought some inventory to satisfy the deal, and then the buyer backed out.
I have many more... :)
But I think it depends -- if you're still only a team of 7, and the 7th hire still got 3% equity (probably not realistic?), then everyone's got enough skin in the game where you probably shouldn't be taking vacations too often.
But if the 7th hire has 0.1% equity, then there should absolutely be a clear vacation policy. It's exceedingly important that clear rules are laid down for what's "fair".
It's exactly that. The idea that people are more productive if all they do is work, for 50 hours a week or more, is such an insanely stupid notion. But I hear it time and again from founders who expect employees with a 0.5% stake to put in as much time as a founder who has a 30% stake.
Even founders should keep their work hours under control--they set the tone for the company, and a workaholic tone isn't healthy. People just burn out, they feel demoralized, and it creates conflict.
Working less also forces you to make hard decisions, to prioritize and focus.
Finally, founders should be HAPPY that employees take time off. It rejuvenates them and makes them that much more excited to get back to work. And often when they're not in the heads-down grind--when their mind is relaxed--they come up with some very good ideas.
Also, figuring out your priorities as far as design first, just get something out there, etc. but whatever it is make sure everyone agrees on the time and methodology, ie design first will take longer.
Another big one, and one I got screwed over on, was finish all the legal paperwork in a program like this as early as possible. Make sure to sign your employee agreement and pay/equity agreement if you're getting it. Do this early on so everyone is on the same page and is clear about what's going on. I was cofounding and just this last Sunday got terminated after spending the last 4 months working on it. No cause or notice and almost without pay (still working on this). Always fear the worst and never think it won't happen to you.
Man, this one a thousand times over. I shudder when I think of all the work that could have been saved if these premature optimizations had never been made (I wrote a blog post on 500m row tables in MySQL about this). A little dose of YAGNI would go a long way to many startups. Also, re: Twitter and Tumblr's scaling problems: they didn't fail because of sporadic downtime. They fixed the actual problems/bottlenecks when they encountered them, and went on.
Books like “Business Model Generation”, by Alexander Osterwalder & Yves Pigneur, “The Startup Owner´s Manual”, by Steve Blank and Bob Dorf could be very useful.
Here in Brazil we have the recented lauched book in portuguese called “Empreendedorismo Inovador – Como Criar Startups de Tecnologia no Brasil”, 25 authors, Editora Évora.
Att. @neigrando
For devs, a great rule of thumb to keep in mind is simply this: When the paychecks stop, so do you. The odds of any startup getting anywhere drop off a cliff once the money runs out, and the founders are running around desperately, talking about commitment and challenge and reward.
As it implies continuous motion and flow of actions towards your startup's growth.